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206: Raphaela Sapire

From venture capital to residential home care, Raphaela Sapire, CEO of Homestay discusses the future of aging care in a family-like environment. 

Bridge the Gap first met Raphael at the VIP Ignite Experience.

 

Lucas 

Welcome to Bridge the Gap podcast, the senior living podcast with Josh and Lucas. This is an episode with a great friend of ours, Raphaela Sapire. She is the CEO of Homstay Senior Living. Welcome to the show. 

 

Raphaela

Thank you for having me. 

 

Lucas

I am so happy that this is finally coming to fruition. You and I have known each other for a year or so, maybe a little bit more. And I’ve been fascinated to see your journey and there’s a number of things that I think that that as your journey has progressed that I’ve really admired. So you are trying to tackle a very big problem in aging. So aging and attainable housing and places that older adults live is a massive variety. And you’re not going for a 500 bed campus. You’re going for residential care homes. So tell us about first, let’s start with your background, which is a very untraditional pathway to senior housing. You’re a young entrepreneur at this, and so I think our listeners would be really fascinated to hear about how you got here.

Raphaela 01:54

Yeah, so I started my career in finance and investment banking, and then I moved into venture capital. And while I was at venture capitalist, I was investing in senior care software. I learned a lot about the industry from talking to operators, discharge planners, care coordinators during diligence at some of the companies I was looking at. And then, so that’s when I first learned about the market and that always stayed with me. I was also investing in crypto, so I ended up joining crypto startup as employee number two.

Lucas 

I feel like that’s a whole other episode just talking about crypto.

Raphaela 

Totally. It’s a whole cat life of mine. But it was really fun. So kind of started when it was four of us. We did the whole, took the ICO experience, really fun. But at the end of the day, I was not super passionate about like the middleware technology that that company was building. And in parallel I was navigating care for my grandparents. And so they live in South Africa and we were seeing if there was anywhere, I’m from Houston, which is where we are today, and I was seeing if there was like kind of helping my family figure out what are our options here? And I became really disappointed by like what you get for what you pay for. And as I tend to do, I kind of went down a rabbit hole and being like, “okay, well, I’ve gotta figure out where the money’s going.”

Raphaela 

And I ended up leaving my job in December of 2019 of course, leading up to the world changing with COVID. 

 

Lucas

Sure. 

Raphaela 

Certainly it shown a spotlight on senior living and senior housing. I spent about six months figuring out what type of company I was gonna build. I didn’t know if I was gonna build a software company, a home care company. I applied for 20 caregiver jobs. I was on BizBuy and LoopNet, like pretending to buy home care agencies and still living facilities to like understand the PML, due diligence.I worked as a caregiver in a care home and where I oriented around, I think a lot of us know the senior population is doubling from 44 million to 89 million people. 

 

Lucas

Incredible demographics. 

 

Raphaela

Mm-Hmm. And people are now living 15 years longer than they did 20 years ago. And already today, and this was pre pandemic, caregivers were the number one most in demand job in America. My perspective and what kind of company am I gonna build was around, okay, “we need to create better jobs. What is the business model along the long term care spectrum, where there’s either enough profit margin to be able to pass back some of that to caregiver wages, or where can I create operational efficiency through technology to reduce those expenses?” And again, like be able to create great jobs. And through that exploration, I landed on residential care homes, which is an $11 billion market. There’s 30,000 of them in the U.S.. And I would say the majority are mom and pop one or two owner-operated.

Lucas 

Thirty-thousand residential care homes, $11 billion marketplace. Have you seen, is it very fragmented? Is that industry even really well represented? I mean, like what’s the pulse, I don’t really know much about that part of the senior care marketplace. Enlighten us.

Raphaela 

Yeah. When you say well represented, what do you mean? 

Lucas 

From an association standpoint, or is it kind of the wild west, is everybody just kind of doing their own thing? 

Raphaela 05:43

Totally. These started in the eighties, nineties, I guess people, seniors either couldn’t afford bigger facilities or didn’t want to leave their community, started sharing homes with other people, often nurses, doctors who were getting close to retirement are the ones who like kind of started operating these. When you come across owner-operators who have been doing this a long time, they tend to have come from that caregiving field in some way. And then they became regulated over time. At first they were not, and now every state has a name for  whether it’s board and care. Or in California it’s an RCFE. Here it’s a small assisted living facility. But ultimately what it is is you take a residential home and you convert it so that anywhere from to two to 16 people live together and it’s an alternative to, well, it’s a submarket of assisted living. So it’s for people who need 24/7 care with not for non-medical care, activities of daily living, bathing toilet might having incontinence meals, med management. And it also is an alternative to let’s say you can’t afford private home care. Well, instead of being in a big facility with 40 plus people where the caregiver ratio might be one caregiver to 20 people, you can be in a home where you’re essentially splitting the cost of private care with four to 12 people. And the ratio is one to four or one to five.

Lucas 

So I find it fascinating. Just your journey of you just digging in. I remember a phone call I’d asked you, I was like, “how’s it going?” “What are you up to?” And you’re like, you’re like, “yeah, I just took a job as a caregiver.” And I was like, “okay, Raphaela’s really in this for the right reason. She wants to learn this. Because that’s not an easy job. What was that experience like?

Raphaela 07:46

Yeah. I mean, it was incredible. The biggest thing, so having come from doing diligence, and I retired as a venture capitalist, I heard time and time again about staffing shortages and being in a home and working alongside caregivers. I just like the biggest takeaway was how much reverence I have for caregivers and how much I deeply am committed to creating great jobs. So for me, what drives me is I want to create thousands of great jobs for caregivers because they really are such an important backbone of the long term care economy. So that’s what really what keeps me going. 

Lucas

So that resonated with you deeply there. And obviously with many of our listeners the majority of them being, you know, larger opera that operate big, big communities that resonates with them too. So where do you see the future? So there’s a big disruption essentially in senior housing that was forced through COVID. And there’s a lot of changing of hands. There’s a lot of different procedures and protocols. Where do you see the residential home care marketplace as a standing in the overall senior housing spectrum? I guess I would say compared to even three, four years ago, where is it today?

Raphaela 09:18

I think it’s becoming more and more popular, often driven by the financial opportunity. These homes are pretty high cash flow, so once it’s stabilized you’re making 30 to 40% at operating income. So what’s interesting is there’s 30,000 of these, I would say the majority are offline. So don’t have a website, if you call, they might, probably don’t answer the phone.

 

Lucas

Really? Okay. 

 

Raphaela 

Because as a mom and pop operator if you’re managing everything around a small business, accounting payroll, answering the phones, doing tours, dealing with staffing shortages, all of these things. It’s really hard to answer the phone if somebody calls. So one of the opportunities that I really see in this market is there’s a real opportunity, but at the same time, in Austin, there’s 60 care homes, the average vacancy rate is 15% and the market price is $5,200.

Raphaela 10:22  

So these are kind of a clotted industry, invisible in terms of like brand as a category, but they’re full and people love them. And I see a real opportunity to kind of reinvent this as a category, as a distinct category beside home care and assisted living. And see an opportunity where in the same way, when you’re traveling here, “oh, did you stay a hotel? Oh no. I sort of stated in Airbnb.” That’s just a room that’s converted into a bedroom that you rent. I envision a world where when grandma falls, you’re lucky enough to have a neighbor that says, “oh, you should see if there’s a Homestay tay in your neighborhood.” So really kind of defining what that category is and elevating kind of the look and feel of the homes with kind of a, let’s paint them, let’s invest in new furniture, and also bring some of the resources that a bigger facility might have  because you’ve got, you can share the cost of a marketing person and activities director while at a cluster level of homes, you can also have those resources. And then allow is on the house level to do what they do best, which is be loving and caring people for the residents in those homes. And we can take care of some of the backend infrastructure for operators. 

Lucas 

So I’ll use a word that Josh uses a lot fascinating.  I can see this opportunity really really taking root here and I can see this, I guess, clash or collision with your background into this marketplace. Is this the direction that’s a good transition because is this the direction that you see where your trajectory is going in the marketplace? Is this what you’re trying to build? 

 

Raphaela 

Yes. I want to build a portfolio of care homes that are operated in the Homestay way. And the benefit of that is that you have lower vacancy rates because there’s actual market presence. There’s operational efficiencies through sharing resources, and ultimately the way that we operate these homes creates a better experience and also drives, with my investor hat on, higher revenue on a permit basis sure. Than it would if it was a mom and pop care home. 

Lucas

Do you see this going like, is this like the Airbnb app or the Yelp app? I mean, do you see some kind of like a future where this looks similar to those things?

Raphaela 

Yeah. I’ve thought a lot about this. The business that I’m talking about has a real estate component, a care operations component, and a product and brand component. And those are three very distinct pieces. And what I’ve been trying to figure out is given the commitment and my personal drive around creating great jobs, but also balancing kind of owning the entire experience with being able to scale and reach as many families and create as many jobs as possible, what is the balance on which of those three real estate, care operations, and products and brands do we need to own to get to that and point vision? 

 

Lucas

Sure. 

 

Raphaela 

And so where I’m orienting around is a franchise model where we run people through the homestay way. They can work at a Homestay operated home. And then when they’re ready, we can lease them a home that is already licensed that they operate in the homestay way but they’re over, like that’s an independent operator leasing the property. And we’re gonna take a percentage of revenue from the top. And we also provide the playbook. So all the things, like nobody gets into this to deal with policies and procedures and like really crush it.

Lucas 

Sure. So they’re having a hard time answering the phone.

Raphaela 

Yea. And so let us take let us help you with giving you the playbook on the policies and procedures, marketing, accounting, answering the phones and help you fill the beds and you focus on creating a great experience. And so that’s how I can see it being really well suited to that model. 

Lucas

So you mentioned staffing in creating a really attractive place to come and work. What has been your experience of the caregivers or the staff that are coming into these residential care homes? Are they coming out of a 400 bed CCRC or are they coming outta the hospital system? Where are these workers coming from?

Raphaela 15:30

I would say it’s a mix. I’ve really enjoyed recruiting straight from CNA school. We had an incredible teammate who joined our team, had no experience, had been an apple genius and was really looking for purpose, went through CNA school. And was such of MVP of a a staff member during some tough times this past year. But, but it is a total mix. There’s also incredible staff members who have been doing this for 10, 15 years. One thing that’s interesting, and tied to my thesis around why I believe residential care homes are the future of senior housing, is around the, the nature of these jobs. So people don’t turn over in the same way in home care as in assisted living. We have staff members who have been here since it opened. 

Raphela 

And the reason for that is it’s a family setting. You really get to know 5 to 10 residents and their families and the staff. And you’re in a nice setting and you’re not stretched thin ove caring for 20 people. You’re caring for five and that’s doable and that’s sustainable. And I think that’s one of the reasons why I’m so bullish on residential care is really pragmatically being like, “okay, what are we gonna do about the 40 million people who are coming into the market? And the fact that this was already the most in demand job before COVID.”  What are we gonna do? And that’s one of the reasons why is because I think it can really create a great job. And I envision a world where over time we can bring in similar to Chick-fil-A, can we bring caregivers through the home state, like rotational six, 12 month rotational program and help them move through to the extent that people want to sure. Whether it’s becoming an owner, like an operator of one or being on the marketing side or the sales side. 

 

Lucas

Yea

 

Raphaela

So I can see it really being a pathway to the American dream. 

Lucas

I love that. I love that so much. And you know, Josh and I talk so often about that. The senior housing industry really needs great people in so many different positions, right. You can have a marketing degree background, you can have an accounting background, you can a real estate background, whatever that is. It’s not just, I’m a nurse, I’m a caregiver, there’s so many different things. And I see this as really solving a problem. It’s very interesting. So I guess before we wrap up, for listeners out there that are just like, “wow, you know, this is a very interesting thing.” We’ll definitely put your contact in the show notes so people can reach out to you. Where do you see homestay in the next, I don’t know, 12 months?

Raphaela 

Yeah. So right now we have been operating two homes to build the playbook. And we are well on our way to kind of perfecting that as we iterate and building a, like a family app that the families use when they’re onboarding, that creates a better experience for them and more transparency into what’s going on in the home. And really starting to take, okay, here’s this playbook and creating a system that we can then provide to the operators of the next 10 homes. So step one is let’s get these two homes filled and prove that people will pay a premium price for a premium product. And then thinking about how do we get to the next 10, and how do we get to the next a hundred? So that’s really where we’re focused is first these two. And then with an eye on kind of the future there. 

Lucas

I love it. It’s complicated, right? Just like many things that is really worthy to go after. It’s not easy. And I really admire your tenacity and your heart and vision behind it. So Raphaela, thanks so much for spending time with Bridge the Gap today and here in Houston, we’re having a good time and you came to our event last night. 

 

Raphaela

Oh yeah. Very fun. 

 

Lucas

And you also went to our VIP event. I was telling Justin and Sara the interesting thing about Raphaela every time I turned around there was a big key figure in our industry, a CEO, a big C-suite type person that was, you weren’t talking to them, they were talking to you. They wanted to know more about you. So I think that there’s some sort of, there’s definitely I don’t know, there’s a mojo, there’s an attraction there that people resonate with with what you’re doing. So we definitely wish you the best. We’re gonna enjoy watching your journey and bringing you back on someday.

Raphaela 20:19

Thank you so much. And I will say like the spaces that you create through VIP that was my first time being in a senior care conference. That was my first time ex having exposure to some of the key stakeholders. And you at that space that was intimate and like a safe space that made me feel comfortable going up to PE like coming, knowing that I’m new in the industry. I think people really are excited to see people who have the courage to try something different. And I encourage other people to join this industry as well. 

Lucas

Well. That’s a great way to end the show in this program. Raphaela, thanks so much, go to BTG voice.com and we will make sure that all of these details are in the show up. So you can connect with Raphaela on LinkedIn and follow her journey. Thanks for listening to another great Episode of Bridge the Gap.

 

 

206: Raphaela Sapire